Gold prices touched their highest settlement in a month on Dec 27 prompted by the U.S. dollar falling to a four-week low. A weaker greenback also had a positive impact on silver prices. Rising gold and silver prices bode well for the overall precious metals market.
Gold lost some of its luster in 2016 after a tumultuous 2015, but has managed to maintain its Bull Run this year. Moreover, the yellow metal with a strong increase this year despite a silent fourth quarter. With gold prices shining, investors could think of investing in mutual funds that have significant exposure to the precious metals sector.
Gold Touches 6-Week High
Gold prices increased 0.2% to settle at $1,289.10 and hit an intraday high of $1,289.92 an ounce on Thursday, its best since Nov 29. Prices of the yellow metal registered nine straight days of gains and increased around 1% in November. It has also advanced more than 12% so far this year.
Additionally, silver prices advanced by 0.2% to $16.71 an ounce and hit an intraday high of $16.73 an ounce, reaching its highest level since late November. Moreover, other key precious metals like platinum and palladium also touched new highs recently. Platinum rose 0.6% to $922.60 on Dec27, reaching an intraday high of $927.20, its best since Dec 5. Palladium settled at $1,069.50 an ounce on Dec 26, touching its highest level since February 2001.
The decline in U.S. dollar was the primary trigger for the rise in gold prices. The U.S. dollar index declined by 0.2% to $93.4 on Dec 27. The greenback index has also posted a fall of 9.7% so far this year. The U.S. dollar fell recently after the Fed officials reiterated their earlier projection of three possible rate hikes in 2018.
Also, the central bank did not alter its initial forecast for inflation. Moreover, concerns remained over Trump’s Tax Cuts and Jobs Act of 2017. Experts now predict that following the implementation of the tax overhaul, the Federal budget deficit will exceed $1 trillion in 2018.
Valuation Concerns a Boon for Gold
The U.S. Dollar Index increased 34% to touch 103 in 2016. During the same period, gold prices fell 34% to $1,250 an ounce. In contrast, the U.S. Dollar index has fallen as low as 92 this year, helping gold prices surpass the $1,200 an ounce mark.
The extent of gold’s gains this year can be gauged from its best-ever level. Gold prices touched $1,900 an ounce, which is the best level that it touched since 2011, when the Dollar Index had hit a low of $75. With gold prices moving near the key level of $1,300 an ounce, the precious metals sector has performed significantly well this year.
Moreover, SPDR Gold Shares ETF (GLD) has increased by 3.3% and 12.1% over the last six months and year to date (YTD), respectively. Additionally, according to Morningstar, the precious metal mutual fund category has posted YTD and one-year returns of 11% and 14.5%, respectively.
5 Precious Metals Mutual Funds to Buy
A weak dollar led the gold prices upward, which makes precious metals funds a strong investment choice. Here, we have selected five precious metal mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging YTD returns. These also have minimum initial investment within $5000 and low expense ratios.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
Fidelity Advisor Gold A FGDAX invests the majority of its assets in securities of companies involved in gold-based activities and in gold coins or bullion. FGDAX may also invest around one-fourth of its assets in different precious metals including gold through its wholly owned subsidiary. The fund seeks appreciation of capital.
The fund has YTD returns of 8%, and an expense ratio of 1.16% compared with the category average of 1.24%. FGDAX has a Zacks Mutual Fund Rank #1.
Wells Fargo Precious Metals A ( EKWAX Quick Quote EKWAX - Free Report) seeks capital growth for the long run by investing a bulk of its assets in stocks of companies involved in the precious metals business. EKWAX may also invest in equity securities of foreign companies like ADRs. The fund invests not more than 40% of its assets in equity securities of companies based in emerging markets.
EKWAX has YTD returns of 9% and an expense ratio of 1.09% compared with the category average of 1.24%. The fund has a Zacks Mutual Fund Rank #2.
Oppenheimer Gold & Special Minerals A OPGSX invests primarily in common stocks of companies engaged in processing, mining and dealing in gold, gold bullion and precious metals-based ETFs. OPGSX invests not more than one-fourth of its assets in the Oppenheimer Gold & Special Minerals Fund (Cayman) Ltd. The fund seeks growth of capital.
OPGSX has YTD returns of 17.3%, and an expense ratio of 1.15% compared with the category average of 1.24%. The fund has a Zacks Mutual Fund Rank #1.
VanEck International Investors Gold Y INIYX seeks growth of capital and income for the long run. INIYX invests a large chunk of its assets in companies involved in gold-based activities. This non-diversified fund may also invest at least one-fourth of its assets in the gold-mining industry.
INIYX has YTD returns of 13.1% and an expense ratio of 1.10% compared with the category average of 1.24%. The fund has a Zacks Mutual Fund Rank #2.
Vanguard Precious Metals and Mining VGPMX invests heavily in stocks of both domestic and foreign companies whose primary operations concern precious metals including gold. The fund seeks growth of capital over the long term. This non-diversified fund may also invest around one-fifth of its assets in gold, silver and other precious metals coins and bullion.
VGPMX has YTD returns of 13.3%, and an expense ratio of 0.43% compared with the category average of 1.24%. The fund has a Zacks Mutual Fund Rank #1.
Want key mutual fund info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week.
Get it free >>